Form 8-K CONAGRA BRANDS INC. For: Nov 09

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 8-K

 

 

CURRENT REPORT PURSUANT TO

SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): November 9, 2016

 

 

CONAGRA BRANDS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		1-7275		47-0248710
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)
222 W. Merchandise Mart Plaza, Suite 1300 Chicago, Illinois				60654
(Address of principal executive offices)				(Zip Code)

(312) 549-5000

(Registrant’s telephone number, including area code)

 

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

---

Item 2.01

Completion of Acquisition or Disposition of Assets.

As previously reported, on November 9, 2016, Conagra Brands, Inc. (formerly known as ConAgra Foods, Inc., the “Company”) completed the previously announced spinoff (the “Spinoff”) of Lamb Weston Holdings, Inc. (“Lamb Weston”) through a distribution of 100% of the Company’s interest in Lamb Weston (approximately 146.0 million shares of common stock) to holders of outstanding shares of the Company’s common stock as of 5:00 p.m., New York City time, on November 1, 2016 (the “Record Date”). Lamb Weston’s business consists of those activities that previously comprised the Company’s frozen potato products business. Lamb Weston is now an independent public company, and its shares of common stock trade under the symbol “LW” on the New York Stock Exchange.

Pursuant to a Separation and Distribution Agreement, dated as of November 8, 2016 (the “Separation and Distribution Agreement”), between the Company and Lamb Weston, the distribution of the Lamb Weston common stock occurred by way of a pro rata dividend to the Company’s stockholders. Each holder of outstanding shares of the Company’s common stock received one share of Lamb Weston common stock for every three shares of Company common stock held as of the Record Date and cash in lieu of any fractional shares of Lamb Weston common stock.

The Registration Statement on Form 10 (File No. 001-37830) (the “Registration Statement”) relating to the Spinoff and filed by Lamb Weston with the Securities and Exchange Commission (the “SEC”) was declared effective on October 21, 2016.

A summary of certain terms of the Separation and Distribution Agreement can be found in the section entitled “Relationship with ConAgra After the Spinoff” in the Information Statement, filed as Exhibit 99.1 to the Registration Statement, and is incorporated herein by reference. Such summary is qualified in its entirety by reference to the full text of the Separation and Distribution Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On November 11, 2016 (the “Effective Date”), the Board of Directors (the “Board”) appointed Craig Omtvedt as a director of the Company, effective as of the Effective Date, to serve until his successor is elected and qualified or until his earlier resignation or removal. Mr. Omtvedt is expected to serve as a member of the Audit / Finance Committee, and the Board determined that he qualifies as an audit committee financial expert. The Board also provided that the size of the Board will be ten directors, effective as of the Effective Date.

The Board has determined that, as of the Effective Date, Mr. Omtvedt satisfies the definition of “independent director” under the listing standards of the New York Stock Exchange and the categorical independence standards contained in the Company’s Corporate Governance Principles.

As a non-employee director, Mr. Omtvedt will receive compensation in the same manner as the Company’s other non-employee directors. Mr. Omtvedt will receive compensation for services during fiscal 2017 of (i) a cash retainer representing a prorated portion of the annual cash retainer provided to non-employee directors, and (ii) a prorated portion of the annual equity award provided to non-employee directors. Accordingly, on November 11, 2016, the Board approved restricted stock units (the “RSUs”) with a value equal to $70,000 to be granted to Mr. Omtvedt on December 30, 2016 (the “Grant Date”), with the number of RSUs being determined by dividing $70,000 by the average of the closing stock price of the Company’s common stock on the New York Stock Exchange for the thirty (30) trading days prior to (and not including) the Grant Date, and rounding to the nearest share. In addition to the retainer and equity award, Mr. Omtvedt is eligible to participate in the other non-employee director compensation arrangements described in the Company’s definitive proxy statement on Schedule 14A filed on August 8, 2016 with the SEC.

 

Item 9.01

Financial Statements and Exhibits.

(b) Pro forma financial information.

 

-2-

---

The unaudited pro forma consolidated balance sheet of the Company as of August 28, 2016 and the unaudited pro forma consolidated statements of income of the Company for the thirteen weeks ended August 28, 2016 and for the fiscal years ended May 29, 2016, May 31, 2015 and May 25, 2014, in each case giving pro forma effect to the Spinoff, are included as Exhibit 99.1 to this Current Report on Form 8-K and are incorporated herein by reference.

(d) Exhibits.

 

Exhibit Number		Description
2.1*		Separation and Distribution Agreement, dated as of November 8, 2016, by and between ConAgra Foods, Inc. and the Lamb Weston Holdings, Inc., incorporated herein by reference to Exhibit 10.1 of Conagra Brands, Inc.’s Current Report on Form 8-K filed on November 10, 2016 (File No. 001-07275).
99.1		Unaudited Pro Forma Consolidated Financial Information of Conagra Brands, Inc.

 

*	Certain exhibits and schedules have been omitted, and the Company agrees to furnish supplementally to the SEC a copy of any such omitted exhibits and schedules upon request.

 

-3-

---

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

Date: November 15, 2016

 

-4-

---

EXHIBIT INDEX

 

Exhibit Number		Description
2.1*		Separation and Distribution Agreement, dated as of November 8, 2016, by and between ConAgra Foods, Inc. and the Lamb Weston Holdings, Inc., incorporated herein by reference to Exhibit 10.1 of Conagra Brands, Inc.’s Current Report on Form 8-K filed on November 10, 2016 (File No. 001-07275).
99.1		Unaudited Pro Forma Consolidated Financial Information of Conagra Brands, Inc.

 

*	Certain exhibits and schedules have been omitted, and the Company agrees to furnish supplementally to the SEC a copy of any such omitted exhibits and schedules upon request.

 

-5-

Exhibit 99.1

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

Spinoff of Lamb Weston Holdings, Inc.

On November 9, 2016, Conagra Brands, Inc. (formerly known as ConAgra Foods, Inc., “Conagra Brands,” or the “Company”) completed the previously announced spinoff of Lamb Weston Holdings, Inc. (“Lamb Weston”) through a distribution of 100% of the Company’s interest in Lamb Weston to holders of outstanding shares of the Company’s common stock (the “Spinoff”) as of 5:00 p.m., EDT, on November 1, 2016.

As of the effective date and time of the distribution, Conagra Brands does not beneficially own any equity interest in Lamb Weston and will no longer consolidate Lamb Weston into its financial results. Beginning in the second quarter of fiscal 2017, Lamb Weston’s historical financial results for periods prior to November 10, 2016 will be reflected in Conagra Brands’ consolidated financial statements as discontinued operations.

Unaudited Pro Forma Consolidated Financial Information

The following unaudited pro forma consolidated financial statements were derived from the historical consolidated financial statements of Conagra Brands, which were prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The unaudited pro forma consolidated financial statements of Conagra Brands consist of unaudited pro forma consolidated statements of income for the fiscal years ended May 29, 2016, May 31, 2015 and May 25, 2014 and for the thirteen weeks ended August 28, 2016, and an unaudited pro forma consolidated balance sheet as of August 28, 2016.

The following unaudited pro forma consolidated financial statements are subject to assumptions and adjustments described in the accompanying notes. Conagra Brands’ management believes these assumptions and adjustments are reasonable under the circumstances and given the information available at this time. The unaudited pro forma consolidated financial statements do not purport to represent what Conagra Brands’ financial position and results of operations actually would have been had the Spinoff occurred on the dates indicated, or to project Conagra Brands’ financial performance for any future period following the Spinoff.

Conagra Brands believes that the adjustments included within Discontinued Operations – Lamb Weston column of the unaudited pro forma consolidated financial statements are consistent with the guidance for discontinued operations under GAAP. Conagra Brands’ current estimates on a discontinued operations basis are preliminary and could change as the Company finalizes discontinued operations accounting to be reported in the Quarterly Report on Form 10-Q for the thirteen week and twenty-six week periods ending on November 27, 2016 and the Annual Report on Form 10-K for the fiscal year ending May 28, 2017.

The unaudited pro forma consolidated financial statements reported below should be read in conjunction with the historical consolidated financial statements of Conagra Brands, the accompanying notes to those financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Conagra Brands’ Annual Report on Form 10-K for the fiscal year ended May 29, 2016 and its Quarterly Report on Form 10-Q for the thirteen week period ended August 28, 2016.

The unaudited pro forma consolidated statements of income give effect to the Spinoff as if it had occurred on May 27, 2013 for the fiscal years ended May 29, 2016, May 31, 2015 and May 25, 2014 and on June 1, 2016 for the thirteen weeks ended August 28, 2016, respectively. The unaudited pro forma consolidated balance sheet as of August 28, 2016 gives effect to the Spinoff as if it had occurred on August 28, 2016. These unaudited pro forma consolidated financial statements include adjustments to reflect the following:

 

•

the contribution by Conagra Brands to Lamb Weston, pursuant to the Separation and Distribution Agreement, of all the assets and liabilities that comprise the business;

 

•

the retirement of $1.44 billion aggregate principal amount of senior notes of Conagra Brands; and

 

•

a cash distribution of $823.5 million to Conagra Brands.

The cash distribution received was deposited and will be maintained in a segregated account. Conagra Brands must use the cash within twelve months of receiving the distribution in any of the following ways: to pay dividends on its common stock, to retire debt incurred prior to July 8, 2016, and to repurchase its common stock.

 

1

---

The pro forma consolidated statements of income do not reflect any impacts related to the retirements of $1.44 billion aggregate principal amount of senior notes of Conagra Brands that occurred in connection with the Spinoff (the “retired debt”) or the use of the cash distribution received in connection with the Spinoff. Interest expense associated with the retired debt in fiscal 2016 and thirteen weeks ended August 28, 2016 was approximately $49.2 million ($31.5 million net of tax) and $12.5 million ($8.0 million net of tax), respectively.

Conagra Brands expects to incur approximately $60 million to $65 million of non-recurring costs in connection with the Spinoff. These amounts are expected to cover matters such as investment advisory, consulting, legal, and auditing services incurred to complete the Spinoff, which have been incorporated in the accompanying unaudited pro forma consolidated balance sheet. These amounts have been excluded from the pro forma consolidated income statements because they are non-recurring in nature and directly related to the Spinoff.

Unaudited Pro Forma Consolidated Statement of Income

For the Thirteen Weeks Ended August 28, 2016

(in millions, except per share data)

 

		Historical Conagra Brands (as reported)				Less: Discontinued Operations - Lamb Weston				Pro Forma Adjustment				Pro Forma
Net sales		$	2,667.5			$	771.9			$	—			$	1,895.6
Costs and expenses:
Cost of goods sold			1,943.4				592.4				—				1,351.0
Selling, general and administrative expenses			281.5				49.8				—				231.7
Interest expense, net			59.0				0.8				—				58.2
Income from continuing operations before income taxes and equity method investment earnings			383.6				128.9				—				254.7
Income tax expense			218.7				50.5				—				168.2
Equity method investment earnings			23.6				10.6				—				13.0
Income from continuing operations			188.5				89.0				—				99.5
Less: Net income attributable to noncontrolling interests			3.8				3.5				—				0.3
Net income from continuing operations attributable to Conagra Brands, Inc.		$	184.7			$	85.5			$	—			$	99.2
Per share amounts:
Basic		$	0.42											$	0.23
Diluted		$	0.42											$	0.22
Weighted average shares outstanding:
Basic			439.0												439.0
Diluted			442.7												442.7

 

2

---

Unaudited Pro Forma Consolidated Statement of Income

For the Fiscal Year Ended May 29, 2016

(in millions, except per share data)

 

		Historical Conagra Brands (as reported)				Less: Discontinued Operations - Lamb Weston				Pro Forma Adjustment				Pro Forma
Net sales		$	11,642.9			$	2,975.0			$	—			$	8,667.9
Costs and expenses:
Cost of goods sold			8,552.1				2,311.9				—				6,240.2
Selling, general and administrative expenses			2,209.4				186.2				—				2,023.2
Interest expense, net			297.8				2.0				—				295.8
Income from continuing operations before income taxes and equity method investment earnings			583.6				474.9				—				108.7
Income tax expense			225.4				179.0				—				46.4
Equity method investment earnings			137.8				71.7				—				66.1
Income from continuing operations			496.0				367.6				—				128.4
Less: Net income attributable to noncontrolling interests			11.1				9.3				—				1.8
Net income from continuing operations attributable to Conagra Brands, Inc.		$	484.9			$	358.3			$	—			$	126.6
Per share amounts:
Basic		$	1.11											$	0.29
Diluted		$	1.09											$	0.29
Weighted average shares outstanding:
Basic			434.4												434.4
Diluted			438.5												438.5

 

3

---

Unaudited Pro Forma Consolidated Statement of Income

For the Fiscal Year Ended May 31, 2015

(in millions, except per share data)

 

		Historical Conagra Brands (as reported)				Less: Discontinued Operations - Lamb Weston				Pro Forma Adjustment				Pro Forma
Net sales		$	11,937.0			$	2,899.0			$	—			$	9,038.0
Costs and expenses:
Cost of goods sold			9,061.4				2,317.6				—				6,743.8
Selling, general and administrative expenses			1,545.3				164.1				—				1,381.2
Interest expense, net			330.0				1.7				—				328.3
Income from continuing operations before income taxes and equity method investment earnings			1,000.3				415.6				—				584.7
Income tax expense			362.1				149.2				—				212.9
Equity method investment earnings			122.1				42.7				—				79.4
Income from continuing operations			760.3				309.1				—				451.2
Less: Net income attributable to noncontrolling interests			11.8				9.3				—				2.5
Net income from continuing operations attributable to Conagra Brands, Inc.		$	748.5			$	299.8			$	—			$	448.7
Per share amounts:
Basic		$	1.75											$	1.05
Diluted		$	1.73											$	1.04
Weighted average shares outstanding:
Basic			426.1												426.1
Diluted			431.3												431.3

 

4

---

Unaudited Pro Forma Consolidated Statement of Income

For the Fiscal Year Ended May 25, 2014

(in millions, except per share data)

 

		Historical Conagra Brands (as reported)				Less: Discontinued Operations - Lamb Weston				Pro Forma Adjustment				Pro Forma
Net sales		$	11,838.2			$	2,796.5			$	—			$	9,041.7
Costs and expenses:
Cost of goods sold			8,910.8				2,217.6				—				6,693.2
Selling, general and administrative expenses			1,778.9				182.9				—				1,596.0
Interest expense, net			377.5				0.9				—				376.6
Income from continuing operations before income taxes and equity method investment earnings			771.0				395.1				—				375.9
Income tax expense			178.3				124.9				—				53.4
Equity method investment earnings			32.5				29.6				—				2.9
Income from continuing operations			625.2				299.8				—				325.4
Less: Net income attributable to noncontrolling interests			12.0				9.4				—				2.6
Net income from continuing operations attributable to Conagra Brands, Inc.		$	613.2			$	290.4			$	—			$	322.8
Per share amounts:
Basic		$	1.45											$	0.77
Diluted		$	1.43											$	0.76
Weighted average shares outstanding:
Basic			421.3												421.3
Diluted			427.5												427.5

 

5

---

Unaudited Pro Forma Consolidated Balance Sheet

As of August 28, 2016

(in millions, except per share data)

 

		Historical Conagra Brands (as reported)				Less: Discontinued Operations - Lamb Weston				Add: Pro Forma Adjustments				Pro Forma
Current assets
Cash and cash equivalents		$	794.6			$	72.4			$	823.5	(A)		$	1,545.7
Receivables, less allowance for doubtful accounts			847.0				210.5								636.5
Inventories			1,637.9				474.3				—				1,163.6
Prepaid expenses and other current assets			127.6				37.2				—				90.4
Total current assets			3,407.1				794.4				823.5				3,436.2
Property, plant and equipment, net			2,736.8				1,043.3				—				1,693.5
Goodwill			4,390.6				133.6				—				4,257.0
Brands, trademarks and other intangibles, net			1,243.5				38.9				—				1,204.6
Other Assets			1,052.1				162.9				—				889.2
Noncurrent assets held for sale			5.8				—				—				5.8
		$	12,835.9			$	2,173.1			$	823.5			$	11,486.3
Current liabilities
Notes payable		$	35.1			$	24.5			$	—			$	10.6
Current installments of long-term debt			487.6				12.8				(246.2	)(B)			228.6
Accounts payable			992.9				260.4				—				732.5
Accrued payroll			124.9				25.5				—				99.4
Other accrued liabilities			724.3				80.9				23.6	(B)(C)(D)			667.0
Total current liabilities			2,364.8				404.1				(222.6	)			1,738.1
Senior long-term debt, excluding current installments			4,255.5				35.6				(1,198.3	) (B)			3,021.6
Subordinated debt			195.9				—				—				195.9
Other noncurrent liabilities			2,220.1				270.6				—				1,949.5
Total liabilities			9,036.3				710.3				(1,420.9	)			6,905.1
Common stockholders’ equity
Common stock of $5 par value, authorized 1,200,000,000 shares; issued 567,907,172			2,839.7				—				—				2,839.7
Additional paid-in capital			1,144.3				—				—				1,144.3
Retained earnings			3,290.7				1,474.4				2,244.4	(E)			4,060.7
Accumulated other comprehensive loss			(363.5	)			(11.6	)			—				(351.9	)
Less Treasury stock, at cost, 130,137,508 common shares			(3,192.9	)			—				—				(3,192.9	)
Total Conagra Brands, Inc. common stockholders’ equity			3,718.3				1,462.8				2,244.4				4,499.9
Noncontrolling interests			81.3				—				—				81.3
Total stockholders’ equity			3,799.6				1,462.8				2,244.4				4,581.2
		$	12,835.9			$	2,173.1			$	823.5			$	11,486.3

 

6

---

Notes to Unaudited Pro Forma Consolidated Financial Information

The following items resulted in adjustments reflected in the unaudited pro forma consolidated financial information:

 

A.

Conagra Brands received a cash dividend of $823.5 million from Lamb Weston in connection with the Spinoff.

 

B.

In connection with the Spinoff, Lamb Weston issued new senior notes to Conagra Brands, which in turn exchanged those notes for $1.44 billion aggregate principal amount of outstanding senior notes of Conagra Brands, thereafter retiring the senior notes of Conagra Brands. This resulted in the recognition of a loss by Conagra Brands of $60.6 million on the early retirement of debt. This loss is excluded from the pro forma consolidated statements of income for Conagra Brands. The pro forma adjustments reflect the elimination of $1.44 billion of long-term debt (including current installments), the elimination of accrued interest payable of $8.5 million (other accrued liabilities) and the accrual of costs of $4.3 million related to this debt exchange (other accrued liabilities).

 

C.

Conagra Brands expects to incur approximately $60 million to $65 million of non-recurring costs in connection with the Spinoff. These amounts are expected to cover matters such as investment advisory, consulting, legal, and auditing services incurred to complete the Spinoff. The estimated amount of such costs not previously paid or accrued as of August 28, 2016, which is $49.6 million, is reflected as an increase in other accrued liabilities and a reduction in retained earnings. For purposes of this presentation, such costs are assumed to be non-deductible.

 

D.

Reflects a tax benefit of $21.8 million associated with the pro forma adjustment to recognize a loss on the early retirement of debt at the applicable statutory income tax rate of 36.0%.

 

E.

Reflects the impact to Conagra Brands Stockholders Equity of the pro forma adjustments described above.

 

7

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Three From Lyons & Simmons Selected Among Best Lawyers in Dallas
• Garner Foods Announces Retirement of CEO, Ann Garner Riddle
• Rise Gold Increases Equity Financing to US$1,000,000